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Spike,
You highlighted i3e are not analagous to Shell - are you suggesting that i3e are analagous to Repsol ?? There are two reasons why Repsol walking away from Tain doesnt necessarily mean much to i3e:
1) Repsol have stated their desire to exit the NS - i3e have not (currently)
2) Tain would have been a small development for Repsol not really moving the needle plus the money is probably better spent outside of the UK consistent with their new direction. A tain / Serenity development would be sizeable for i3e and would move the needle.
"Do you believe anyone would pay cash to I3E now for the Serenity licence?" - I dont think so. Majid has previously said that you would need an approved FDP in order to realize any value if I recall correctly. A Tain + Serenity with an approved FDP maybe worth something. I'm not saying it definetly is but maybe and I think this is what i3e are looking at. Serica or Ithaca (cannot remember which) recently bought an asset that was of similar size to Tain / Serenity with the clear intention of developing.
Anyway - sign up to the investor meet Company presentation and ask a couple of questions!
Are our North Sea losses commercially valuable to others? Rather than walk away from the licence could we sell and the buyer uses the transferred losses to offset against profit? Not sure how things stack up on licence transfers in the NS.
Still no nsta 33rd round next batch awards , probably because awards are not being taken up.
Tain Serenity would be a big capex commitment for Serica and new Ceo there is down beat about North Sea oil.
Tony did you read the article - consideration is not payable until first oil.
Cambo would also be an exception due to its size and the sellers being Shell are hardly analogous to I3E. We can see the value of Tain as Repsol just walked away.
Do you believe anyone would pay cash to I3E now for the Serenity licence?
There is plenty activity going on in the North Sea, I think many are worried though what a labour gov will bring. There is though a huge difference between those that are cash strapped and can only survive on gaining finance such as seen by DELT yesterday, and those companies with resource to spend of which their are many.
Looks like i3 UK ops are in close down mode.
Most oil companies will step back from investing in the North Sea until a clear understanding on what will happen when labour comes to power.
"However it’s pretty clear that no one in the North Sea is buying undeveloped assets for upfront cash payments so in that sense it’s worthless as it stands."
https://www.offshore-technology.com/news/ithaca-cambo-shell/
After a 10 second search - here is one example of ithaca buying undeveloped assets - Its a reasonable bet that there are other examples
Joe - the market value and accounting carrying value are two different things. While I3E still have an intention to take it forward it’s appropriate that it carries some value on the balance sheet.
However it’s pretty clear that no one in the North Sea is buying undeveloped assets for upfront cash payments so in that sense it’s worthless as it stands.
I still think it’s a drag on the SP - the fact that they confirmed no capex for this year was positive but it still remains hanging there as a potential near term money pit, although I suspect most investors by now expect it to be relinquished in the future, unless there is a drastic change in political environment
The savings they would make by closing the UK operation would easily cover the impairment charge going forward. Indeed they could comfortably raise the dividend in my opinion. The North Sea is essentially closed for new business, probably for years to come so let’s bite the bullet Majid.
"no dividend." Oh no
"no dividend."
Oh my
An impairment charge is going to lead to a loss albeit a non-cash charge - no paper profits, no retained earnings, no dividend.
Except that the latest capital structure can offset the reduction in retained earnings/distributable reserves and enable the payment of dividends.
I3e are currently earning more than sufficient cash to fund a dividend - thats the way I see it !
Spike 12:32
"Serenity is worthless as it stands."
Except in the eyes of the BOD and the accounts:
"For its UK assets, management has considered the results of the 31 December 2022 impairment test which used a discounted cash flow model of a one well development of the Serenity field and has concluded that there were no developments in 2023 which would change the conclusions reached at the time, and therefore that no indicators of impairment were present. A one well development may be dependent on access to infrastructure at neighbouring fields which may not become available to the Group, and therefore the commercial development of Serenity is not certain."
"explains why i3e undertook another Capital Restructure so soon after the previous one - i.e. to offset the impairment charges"
Can you please expand on how that works?
“Not sure we could even sell a unified Tain and Serenity if they picked up the Tain license so probably best to drop and focus on Canada“
I’ve been saying for a long time there is no cash being paid for North Sea projects pre first oil. Serenity is worthless as it stands.
"probably best to drop and focus on Canada. I doubt this will have any impact on the sp as well"
- I expect if we dropped serenity, our SP might increase!
Thanks Stas. I have to say when I woke up and saw the rns today I thought the complete opposite was going to happen. I took a £100k hit today, which is a good (and last) lesson for me on speccies. My immense dislike of UK political parties knows no bounds at the moment, so agree on all Nth Sea comments today. The entire UK O&G industry is about to be wiped out by successive ret@rded governments. Not sure we could even sell a unified Tain and Serenity if they picked up the Tain license so probably best to drop and focus on Canada. I doubt this will have any impact on the sp as well.
Now agree that even if offered Tain we should pass. Best case is for Serica to take on Tain and we chuck in Serenity for future profit share
DELT - down 40% as I type. It would be interesting to hear whether GGG is going to hold tight or cut his losses and get out. The RNS was a poor read and is anything going to change between now and the end of May ?
In my view we should have got rid of serenity and all north sea a long time ago and concentrated on the cash cow of Canada and not the cash draw of the UK. I'd be pleased to see i3 become solely focussed on Canada, quite apart from what might happen to the UK taxes and levies were a labour government to get in, god help us!
There are no slam dunks when it comes to financing / farmouts - we'll see shortly how the SP reacts.
On a similar note - I'm beginning to lean towards the view that Serenity may be a dead duck - a couple of snippets from the YE report:
"There is a high cost associated with a field development plan and therefore it is contingent upon raising the necessary funds. There is uncertainty whether a one well development of the field would be commercial, and it is likely to require access to thirdparty production, processing, and transportation facilities. If the Group is unable to develop its North
Sea assets, i3 Energy Plc may not recover its loan and investment into i3 Energy North Sea Limited which could negatively impact the Company’s distributable reserves and ABILITY TO PAY DIVIDENDS. See Financial Statements note 3 where the carrying value of intangible exploration and evaluation assets has been identified as a critical accounting judgement."
"The Group considers the risk level to have increased in 2023 due to approaching the September 2024 deadline for FDP on the P.2358 licence."
The good news for i3e is I think the market has already written off Serenity and if it does not advance - then it should spark an effort to trim uk costs which would be a positive.
Also possibly explains why i3e undertook another Capital Restructure so soon after the previous one - i.e. to offset the impairment charges and allow the payment of dividends.
Unlucky on your Shares in Deltic energy
Tough when you a small company and can’t get a partner due to the Government standing on oil .
Hope the company finds a partner and finance.